Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
Our Explanation of Financial Ratios includes calculations and descriptions of 15 financial ratios. As you calculate the financial ratios you will also gain a deeper understanding of a company's operations and financial...
they are arranged include: operating revenue accounts such as Sales and Service Fee Revenues operating expense accounts including Salaries Expense, Rent Expense, and Advertising Expense nonoperating or other income...
What is the free cash flow ratio? Definition of Free Cash Flow Free cash flow for a year is an amount (as opposed to a ratio or percentage) usually defined as: net cash provided by operating activities for the year minus...
-operating expenses, and losses from the revenues (both operating revenues and nonoperating revenues and gains). When a corporation’s stock is publicly-traded, the amount of earnings must also be shown on the income...
when: Actual sales are greater than budgeted sales Actual operating expenses are less than budgeted operating expenses Budget variances should be analyzed to identify the reasons for the differences between the actual...
number will begin with the digit “1”. Liability accounts will begin with the digit “2”. Operating revenue accounts will begin with the digit “3”, etc. Operating expenses will use accounts beginning with...
accounts: assets, liabilities, stockholders’ equity Income statement accounts: operating revenues, operating expenses, other revenues and gains, other expenses and losses The balances and activity in the general...
Expenses are often divided into two major classifications: Operating expenses which involve a company’s main activities. A retailer’s operating expenses include the cost of goods sold and its selling, general and...
Instead of LIFO If a U.S. corporation’s cost of inventory items are continuously increasing and the corporation has been experiencing operating losses and negative taxable income, the use of FIFO means matching its...
example of a semivariable cost is the annual cost of operating a vehicle. Some of the vehicle’s total annual operating costs will be the same regardless of the miles driven. These fixed costs include depreciation,...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
How can a company with a net loss show a positive cash flow? Definition of Net Loss A net loss occurs when a company’s revenues and gains are less than its operating expenses, other expenses and losses. The net loss or...
Our Explanation of Chart of Accounts shows how a typical chart of accounts is organized and examples of possible account numbering. It concludes with a quick review of debits and credits.
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Since our Explanation of Cash Flow Statement illustrates how the amounts are determined, you will get a better understanding of this very important financial statement. No longer will you look at only the income...
Our Explanation of Bookkeeping provides you with a rich understanding of the recording of transactions. It then discusses the additional steps necessary for preparing accurate financial statements. This is great for...
The costs incurred to bring an asset back to an earlier condition or to keep the asset operating at its present condition (as opposed to improving the asset). For example, if a company truck is damaged, the cost to...
are considered to be operating expenses and are presented on the income statement as SG&A expenses. (SG&A is the acronym for selling, general and administrative expenses.) Sales commissions are not part of the...
The change in total costs in response to the change in some activity. For example, some of the costs of owning and operating a vehicle will increase in total with an increase in miles driven. These are referred to as...
Also referred to as SG&A. For a manufacturer these are expenses outside of the manufacturing function. (However, interest expense and other nonoperating expenses are not included; they are reported separately.)...
Under the accrual method of accounting, this account reports the employer’s portion of the health insurance cost incurred by the company during the period indicated in the heading of the income statement, whether...
Under the accrual method of accounting, the account Salaries Expense reports the salaries that employees have earned during the period indicated in the heading of the income statement, whether or not the company has yet...
Selling expenses are part of the operating expenses (along with administrative expenses). Selling expenses include sales commissions, advertising, promotional materials distributed, rent of the sales showroom, rent of...
One of the main financial statements (along with the income statement and balance sheet). The cash flow statement reports the sources and uses of cash by operating activities, investing activities, financing activities,...
Sales. Its detailed purchases and changes in inventory will be presented as one amount with the description Cost of Goods Sold. Perhaps thousands of operating expenses will be presented as one amount with the...
Administrative expenses are part of the operating expenses (along with selling expenses). Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries...
Under the accrual basis of accounting, the Interest Revenues account reports the interest earned by a company during the time period indicated in the heading of the income statement. Interest Revenues account includes...
A non-operating or “other” reduction in net income resulting from a judgment against the company. It is shown in the accounting period when the amount is determined to be probable and the amount can be...
Our Explanation of Debits and Credits describes the reasons why various accounts are debited and/or credited. For the examples we provide the logic, use T-accounts for a clearer understanding, and the appropriate general...
a mathematical tool known as simple linear regression analysis. This will calculate the fixed expenses (a) and the variable rate (b) based on the historical observations. Example of Mixed Costs The annual expense of...
vs Operating Income Let’s assume that a company is a retailer whose main business activities are the purchasing and reselling of merchandise. When the retailer sells $5,000 of merchandise that it had purchased at a...
, which is reported on the balance sheet. 35. Depreciation is recorded to comply with the __________ principle. Select... full disclosure conservatism matching 36. Which income statement format will actually display the...
, and the accounting equation result in a connection between the income statement and the balance sheet. For example, the net income from the income statement increases the retained earnings reported on the balance...
What is the difference between revenue, income, and gain? Definition of Revenue Revenue is the amount earned from a company’s main operating activities, such as a retailer selling merchandise or a law firm providing...
. Depreciation, depletion and amortization are also described as noncash expenses, since there is no cash outlay in the years that the expense is reported on the income statement. As a result, these expenses are added...
of operating income is shown. As a result, the income statement allows for an easy comparison of the operations and profitability of companies regardless of their debt and interest expense. Join PRO to Track Progress...
Under the accrual method of accounting, this account reports the amount of worker compensation insurance expense that pertains to the period indicated in the heading of the income statement, whether or not the company...
. Synergy is sometimes described as 1 + 1 = 3. Let’s use an example. Suppose a company operates solely in the U.S. Another company operates in Asia. The two companies decide to merge because they believe the combined...
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